Michael J. Rosen

Michael J. Rosen is President of ML Innovations, Inc., a fundraising and marketing consulting firm serving nonprofit organizations and the companies that assist them. An AFP Certified Master Trainer and winner of the prestigious AFP/Skystone Prize for Research, Michael is the author of the bestselling book "Donor-Centered Planned Gift Marketing."

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In a preview of their session “Behavioural Economics: Everything You Know about Donor Decision Making is Wrong” at the AFP International Fundraising Conference (Baltimore, March 29-31, 2015), Ross told me the duo will show attendees how they can apply the work of Dr. Daniel Kahneman, author of the bestseller Thinking, Fast and Slow, to better understand their prospects and donors and, thereby, enhance their fundraising efforts.

Kahneman, a psychologist who won the Nobel Prize in Economic Sciences, says we have two complementary processes by which we make decisions in life, including fundraising decisions. He refers to these as System 1 and System 2. System 1 operates automatically and quickly, like an autopilot. System 2 allocates attention to effortful, conscious mental activities. We think System 2 is at work most of the time; however, Kahneman has found it is, in fact, System 1.

Ross asserts:

Hutson and I believe that Kahneman’s insights are the next big thing in fundraising.”

Ross observes that most fundraising professionals think donors are making rational judgments when they are not. Think of the old sales axiom: “People buy based on emotion then justify, after the fact, with logic.” A similar process is often involved with philanthropic decision-making.

Donors make philanthropic decisions based on six to eight key mental heuristics — or System 1 short cuts — that we all use. Ross says that fundraisers can learn these heuristics and use them to transform response rates, gift sizes, and more. In their session, Hutson and Ross will introduce participants to these key heuristics and show them how that knowledge is being used to remarkable effect by charities around the world.

Ross promises, “The session will share examples that will utterly confound many of the ideas you have about fundraising, and at the same time explain why many techniques and approaches that seem counter intuitive actually work.”

One of the key mental heuristics that Ross and Hutson will explore is “Anchoring.” Ross and Omar Mahmoud, Chief of Market Knowledge at UNICEF, explain it this way:

We respond to an initial stimulus in our subsequent choice. So, if people are willing to make a gift, and you ask for a larger gift initially then you are more likely to secure an actual gift at a higher level. So, the larger initial number ‘anchors’ the result.”

When I operated my pioneering phone fundraising firm, we referred to the process of “Anchoring” as a “Sight-Raise Ask.” To generate a high average gift, we would first ask the prospect for an amount we knew we would be unlikely to receive. For example, we might ask for a $1,000 donation. We then would respond appropriately to the prospect’s questions and objections before advancing a second ask and, possibly, a third. The results of using a reasonable Sight-Raise Ask were higher response rates and higher average gifts compared with making a more modest, targeted first ask.

Kahneman’s concept of “Anchoring” explains the effectiveness of the “Sight-Raise.” When prospects were called, they were not expecting a philanthropic conversation. So, their philanthropic thinking was set to $0. Any amount asked would be compared to the prospect’s initial $0-mindset, the pre-existing anchor. Compared with $0, a $100 donation is quite a lot. By asking for $1,000, we shifted the anchor. A $100 donation compared with a $1,000 is not a lot of money.

It’s important to note that the anchor amount needs to be reasonable. A ridiculously high anchor amount would not have been effective.

To learn more about each of the key mental heuristics, along with some terrific examples, you can read a free copy of the article written by Ross and Mahmoud by clicking here. You can also plan to attend the Ross-Hutson session during the AFP Conference or purchase the session recording following the Conference. If you’ve never heard Ross present, you really owe it to yourself to hear him. You’ll learn a lot and have fun in the process.

By the way, I’m planning to attend the Conference. Let me know if you’ll be going. I hope to see you there.

13 Responses to “Bernard Ross Reveals the Next Big Thing in Fundraising!”

Michael – Great post, as always. We know donors make “quick” emotional decisions, but this way of thinking about it is beautifully put. I love the idea of “anchoring” and “sight- raise ask”. I’ve always talked about how important it is to get donors to “think big” and set their sights high, and now have some concrete evidence to back it up!

As someone who meets donors two or three times a week, I am on a fascinating journey of knowing exactly what donors think. As always, the problem is that what donors want is not always what works for charities. All I know for certain is that few charities are truly empowering donors to ensure that they get what they want in the way that really gives ace results. The problem lies not with fundraisers but often with trustees lacking trust in donors when donors trust the charity more than vice versa

Richard, thank you for your comment. Effective fundraising comes down to building strong relationships. As we all know from our personal lives, trust is the foundation of any good relationship. And, as you have pointed out, trust is a two-way street.

At the AFP Conference, NewSci will be demonstrating how we are utilizing IBM Watson to do real-time, in-depth personality profiles of all the donors in the donor base. Or, perhaps, you want to segment the donors giving 80 percent of the money into categories for effective communications. In all the tech magazines, another of the NEXT big things will be the impact of cognitive computing. This is what we’ll be sharing at AFP. Look forward to seeing you and your readers there!

Jay, thank you for commenting. You’ve demonstrated two important things: 1) there is room for more than one “next big thing;” and 2) while much can be learned in the seminar rooms, AFP Conference attendees can also learn much by going through the Exhibit Hall and talking with the various service providers that will be present. I look forward to seeing you at the AFP Conference!

Very interesting read. I dont like to think that donors can be manipulated through psychology. That said, being a good salesman and having the right people skills can land you some great donations. I think being honest and keeping a good rapport is key.

Valentin, thank you for commenting. The insights provided from the field of behavioral economics can certainly be used to manipulate donors. However, development professionals should take great care to avoid manipulation. Instead, we should use our enhanced communication skills to more effectively inspire people to give.

Christie, thank you for commenting and sharing the link. Our prospects and donors come to the table with their own motivations. Our job is to understand them so that we can inspire them to give. However, when inspiration gives way to manipulation or coercion, it becomes unethical. When we inspire donors, we help them to do what they want to do without any post-gift remorse.